Page:United States Statutes at Large Volume 100 Part 3.djvu/542

 100 STAT. 2350

PUBLIC LAW 99-514—OCT. 22, 1986

"(I) in the case of the 1st taxable year to which such an election applies, be established in accordance with the major categories in the applicable Government price index, or "(ID in the case of the 1st taxable year after such election ceases to apply, be established in the manner provided by regulations under section 472; "(ii) the aggregate dollar amount of the taxpayer's inventory as of the beginning of the year of change shall be the same as the aggregate dollar value as of the close of the taxable year preceding the year of change, and "(iii) the year of change shall be treated as a new base year in accordance with procedures provided by regulations under section 472. "(B) YEAR OF CHANGE.—For purposes of this paragraph, the year of change under this section is— "(i) the 1st taxable year to which an election under this section applies, or "(ii) in the case of a cessation of such an election, the 1st taxable year after such election ceases to apply." (b) CLERICAL AMENDMENT.—The table of sections for subpart D of part II of subchapter E of chapter 1 is amended by striking out the item relating to section 474 and inserting in lieu thereof the following: "Sec. 474. Simplified dollar-value LIFO method for certain small businesses." (c) EFFECTIVE DATES.—

(1) IN GENERAL.—The amendments made by this section shall apply to taxable years beginning after December 31, 1986. (2) TREATMENT OF TAXPAYERS WHO MADE ELECTIONS UNDER EXISTING SECTION 474.—The amendments made by this section

shall not apply to any taxpayer who made an election under section 474 of the Internal Revenue Code of 1954 (as in effect on the day before the date of the enactment of this Act) for any period during which such election is in effect. Notwithstanding any provision of such section 474 (as so in effect), an election under such section may be revoked without the consent of the Secretary. SEC. 803. CAPITALIZATION AND INCLUSION IN INVENTORY COSTS OF CERTAIN EXPENSES.

(a) GENERAL RULE.—Part IX of subchapter B of chapter 1 (relating to items not deductible) is amended by inserting after section 263 the following new section: "SEC. 263A. CAPITALIZATION AND INCLUSION IN INVENTORY COSTS OF CERTAIN EXPENSES. "<a) NONDEDUCTIBILITY OF CERTAIN DIRECT AND INDIRECT COSTS.—

"(1) IN GENERAL.—In the case of any property to which this section applies, any costs described in paragraph (2)— "(A) in the case of property which is inventory in the hands of the taxpayer, shall be included in inventory costs, and "(B) in the case of any other property, shall be capitalized.

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